{"id":6211,"date":"2025-10-09T13:52:06","date_gmt":"2025-10-09T13:52:06","guid":{"rendered":"https:\/\/fintech.global\/globalregtechsummitusa\/?p=6211"},"modified":"2025-10-31T12:36:52","modified_gmt":"2025-10-31T12:36:52","slug":"is-embedded-compliance-becoming-the-new-backbone-of-financial-services","status":"publish","type":"post","link":"https:\/\/fintech.global\/globalregtechsummitusa\/is-embedded-compliance-becoming-the-new-backbone-of-financial-services\/","title":{"rendered":"Is embedded compliance becoming the new backbone of financial services?"},"content":{"rendered":"

In the fast-paced realm of financial services, where innovation clashes with ever-tightening regulations, embedded compliance is gaining traction as a seamless integration of regulatory checks into core operations. This approach leverages technology to automate and embed compliance directly into products, workflows, and customer interactions, potentially reducing risks and costs. Yet, as fintech disrupts traditional models, can embedded compliance truly serve as the foundational support for sustainable growth? We speak to a number of key industry players on this topic, in a part-one of a two-part series.\u00a0<\/strong><\/p>\n

For decades, compliance was treated as an add-on, as firms built products, ran transactions, and only then layered compliance checks over the top, claims Areg Nzsdejan, CEO of\u00a0Cardamon<\/a>.<\/p>\n

The result of this, for Nzsdejan, was predictable. \u201cBottlenecks, remediation costs, regulatory fines, and an adversarial relationship between compliance and commercial teams.\u201d<\/p>\n

The Cardamon CEO believes that this model is breaking. Considering this, what is then the next step for firms?<\/p>\n

\u201cThe next chapter is embedded compliance: controls integrated directly into infrastructure, operating invisibly, in real time. Just as payments became \u2018rails\u2019 that sit beneath every fintech product, compliance is becoming the backbone layer of financial services,\u201d he said.<\/p>\n

Embedded compliance, Nzsdejan argues, flips the model from reactive to preventive \u2013 instead of policing after the fact, risks are intercepted at the source. For example, a payment that fails sanctions screening never leaves the system and a client without a verified identity never makes it onto the books.<\/p>\n

Such a shift can remove the constant pull of audits, firefighting and remediation \u2013 instead of catch and correct, firms move to design out the risk. Compliance is enforced at the moment of action, not weeks later during review.<\/p>\n

For Nzsdejan, the transition to embedded compliance is already underway, enabled by a convergence of infrastructure and AI.<\/p>\n

Examples of these can be found in API-first compliance layers. \u201cProviders now offer KYC, AML, sanctions, and tax compliance as embeddable services that integrate directly into onboarding, payments, and trading flows,\u201d said the Cardamon CEO.<\/p>\n

Other examples include machine learning and NLP \u2013 which often includes real-time monitoring of contracts, communications and transactions which make it possible to detect anomalies, mis-selling risks or suspicious activity as they occur.<\/p>\n

There is also cloud-native orchestration and regulatory ontologies and mapping engines. On the first, controls can be deployed across multiple jurisdictions simultaneously without breaking the user journey, ensuring local obligations are enforced while global consistency is maintained.<\/p>\n

On the latter, these translate sprawling regulation into structured, machine-readable rules, which is critical for scaling compliance across products, regions, and regulators.<\/p>\n

\u201cThe net effect is that compliance becomes more programmatic with human oversight. It shapes what users and employees can or cannot do automatically, much like payments infrastructure did a decade ago. At Cardamon, we are embracing these principles and help our partners by providing everything via APIs if requested \u2013 we don\u2019t just sell our solution, we become build partners,\u201d said Nzsdejan.<\/p>\n

Despite all this, global financial firms face compliance sprawl, claims the CEO. One control per regulator, per jurisdiction, often duplicating effort and increasing operational drag. Embedded compliance is able to consolidate this.<\/p>\n

He said, \u201cBy mapping obligations centrally but enforcing them locally, firms can launch products faster across multiple markets, reduce duplication between local compliance teams and demonstrate consistency to regulators while still honouring jurisdiction-specific requirements.\u201d<\/p>\n

If this is done well, embedded compliance has the ability to transform cross-border compliance from a roadblock into a competitive advantage, claims Nzsdejan.<\/p>\n

\u201cThe firm can expand internationally without carrying an exponential compliance burden. For reference, at Cardamon we have enabled our customers to solve compliance problems across 6 continents already \u2013 harmonising their controls and policies to streamline the process,\u201d he said.<\/p>\n

Historically, the return on investment for compliance was calculated in fines avoided or headcount reduced. Instead, embedded compliance transforms the value proposition.<\/p>\n

The speed to market is increased, as new features or products launch faster due to pre-wired compliance checks. There is also lower remediation costs, as incidents are prevented rather than corrected after the fact, investor confidence climbs as firms are able to show that compliance is resilient by design and faster approvals and cleaner customer experiences reduce churn and boost growth.<\/p>\n

This, for Nzsdejan, shows that the ROI case is becoming clearer, in that compliance is not just a shield against downside risk, it is an accelerator of growth, with the Cardamon CEO highlighted that its customers are already launching projects 95% faster in certain cases.<\/p>\n

Nzsdejan finished, \u201cThe firms that win in this next era will not treat compliance as an overlay. They will treat it like core infrastructure: as fundamental as payments, identity, or cloud hosting.<\/p>\n

\u201cEmbedded compliance does more than reduce cost or risk. It redefines how financial services operate: faster, safer, and globally scalable. In a world of tightening oversight, shifting regulations, and unforgiving regulators, compliance is no longer a cost center. It is the backbone of modern financial infrastructure.\u201d<\/p>\n

Cutting friction\u00a0<\/strong>\u00a0<\/strong><\/p>\n

How does embedding compliance at the infrastructure level reduce operational risk? Michael Thirer, CLO at\u00a0Muinmos<\/a>, gave an example of how Muinmos embeds the client risk assessment (CRA) in the client application.<\/p>\n

He explained \u201cOur platform embeds decision-making between SDD, CDD and EDD (simplified, normal or extended due diligence) in the client journey itself, making it both as relevant and as compliant as possible.\u201d<\/p>\n

Another example he gave was of the firm\u2019s AI Regulator Classification Engine. \u201dIt will let you know, right from the beginning of the relationship with the client, all the data you need in order to make sure you don\u2019t mis-sell (what is their regulatory category \u2013 Professional Client, Sophisticated Investor, Qualified Holder etc. \u2013 what services and products are suitable and appropriate for them, their risk appetite, etc.).\u201d<\/p>\n

If such steps are known from the start and its embedded in a firm\u2019s infrastructure, Thirer argues, that chance of you mis-selling or exposing yourself to unnecessary risk drops dramatically.<\/p>\n

In terms of what tech enables such seamless compliance integration, whilst Thirer raises AI as a significant player \u2013 the truth is that such a technology has already been here for years.<\/p>\n

\u201cWhat has changed is that people now use it broadly in other areas as well, and therefore are more willing to adopt it in compliance as well. It\u2019s important, of course, to keep it fully explainable and accountable, as we do \u2013 otherwise, AI in itself becomes a risk,\u201d he said.<\/p>\n

Can embedded compliance support cross-border operations without adding friction? Here, Thirer makes clear that embedded compliance cuts friction, especially in a cross-border context.<\/p>\n

He said, \u201cA simple example is the client onboarding journey. In different countries, there are different compliance requirements. Embedding the compliance requirements in the client journey from the start, along with real-time decisioning capabilities, means the client only goes through the shortest journey possible, hence reducing friction.<\/p>\n

\u201cThis is what allows us, for example, to boast a 97% completion rate for the entire client application (not just IDV and basic questionnaire, but everything including client classification and suitability and appropriateness assessments) \u2013 way above market standard.\u201d<\/p>\n

The ROI is proving to be one of the clearest examples of why embedded solutions are thriving.<\/p>\n

Thirer outlined, \u201cWe have clients telling us they saved 32% on IT costs by embedding all in one process, others stating they reduced onboarding time by over 45%, and others that their case handling time dropped by 50%.\u201d<\/p>\n

Reducing risk<\/strong><\/p>\n

For Madhu Nadig, CTO at\u00a0Flagright<\/a>, embedding controls at the infrastructure layer cuts risk because policy checks happen before money or data moves.<\/p>\n

He said, \u201cThe cleanest examples are name\u2011check systems that verify account holder details at payment time and shared fraud\u2011data arrangements that block suspect transfers in flight, both envisaged in the EU\u2019s payments reforms alongside stronger consumer protection. Because the PSR is a regulation, many of these conduct rules will apply uniformly once finalised, which reduces fragmentation for cross\u2011border operations.\u201d<\/p>\n

The enabling stick for Nadig is often straightforward \u2013 event streams from the core, policy-as-code at the API gateway, ML models for anomaly scoring, and auditable decisions that analysts can override within minutes.<\/p>\n

Instant payments rules that require IBAN-to-name confirmation can show how this works as an invisible check that adds minimal friction while materially reducing misdirected payments.<\/p>\n

\u201cMeasuring ROI then goes beyond license consolidation; firms track shorter onboarding cycles, fewer write\u2011offs from fraud or scams, and faster audits because evidence is generated automatically at run\u2011time,\u201d concluded Nadig.<\/p>\n

Read the daily RegTech news<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

In the fast-paced realm of financial services, where innovation clashes with ever-tightening regulations, embedded compliance is gaining traction as a seamless integration of regulatory checks into core operations. 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